Meanwhile, the constitutional questions keep arising. Richard Epstein, a respected professor of law at the University of Chicago, has a column in today's WSJ arguing that the bill's provisions forcing private insurance companies to become essentially public utilities violates a unanimous Supreme Court precedent from 1989.
Traditional public utility regulation applies to such services as gas, electric and water, which were supplied by natural monopolists. Left unregulated, they could charge excessive or discriminatory prices. The constitutional art of rate regulation sought to keep monopolists at competitive rates of return.Then there are the states' attorneys-general who are raising federalism questions. The South Carolina attorney general is raising the point I blogged about a couple of days ago.
To control against the risk of confiscatory rates, the Supreme Court also required the state regulator to allow each firm to obtain a market rate of return on its invested capital, taking into account the inherent riskiness of the venture. The orthodox legal approach was summed up in Justice William Rehnquist's unanimous 1989 decision in Duquesne Light v. Barasch. Duquesne Light allowed the state regulators a wide choice of methods so long as the "bottom line" secured the appropriate rate of return. There's no need to discuss the fine points here, because not one syllable in the Reid bill is dedicated to securing that constitutionally guaranteed minimum rate of return.
Duquesne Light carries extra weight here because health-insurance industries are far from natural monopolies, so that regulating their rates calls for an extra dollop of judicial scrutiny. At this point, the Reid bill is on a collision course with the Constitution. I take it for granted that, constitutionally, the federal government could not just require all private health insurers to liquidate tomorrow, without compensation.
What's done here is a close second.
Nelson's deal with Reid has attracted the most attention because it exempts Nebraska from paying its share of Medicaid expenses in perpetuity. Medicaid expenditures are among the most expensive federal mandates on state governments, and the Obamacare bill will significantly increase costs for all other states that don't somehow wangle a similar deal.And then there is the whole provision that DeMint has forced the Senate vote on - whether mandating that individuals buy health insurance is constitutional.
It also raises a constitutional issue, which McMasters explained in a statement issued earlier today:
"The Nelson provision is unusual in that there is not cut off date or phase out. Many provisions in federal law have a sunset date -- say 2, 5, 10, or even 20 years-- but this provision will continue in perpetuity. Quite obviously, this issue raises very serious concerns about equity, tax fairness as well as the constitutionality of having federal tax levies and mandates that treat one state differently from all the others.
"If the Nelson provision is not unprecedented, I feel comfortable in saying it is an exceptionally rare occurrence. States generally are treated in a similar manner. In this case, Nebraska will be treated in a widely divergent manner than any other state.
"Beginning today, I have instructed my attorneys to begin looking into the constitutionality of this provision and exploring the options that may be available to South Carolina and other states to defend taxpayers should this provision ultimately become law."
No wonder they wanted to rush through in such a God-awful hurry. They had to get this bill through and voted on with barely a spare moment to read the thing so that they would have time to take a break until January 18. Ramming through such a crap-sandwich of a bill is extremely tiring. They just don't have the energy to consider either the constitutionality of the thing or the economic consequences. But hey, they do get to mouth pieties about how historic they are being. As Michael Barone points out, the Kansas-Nebraska Act was historic also, but I don't think that we want to follow that model of ahistoric, but a colossally bad bill.
Michael Barone is one of the writers I most admire, but I do believe that he has a small historic error in his column when he describes how Senator Stephen Douglas got the Kansas-Nebraska Act passed.
Douglas did something far more difficult. He got the Senate to pass a bill some of whose provisions were supported by half of the Senate plus Douglas and some of which were supported by the other half plus Douglas.That was the Compromise of 1850 that Douglas got passed through the Senate after Henry Clay had given up hope. Douglas split the Clay omnibus bill into separate provisions and got different majorities to pass the separate parts. He was able to pass the Kansas-Nebraska Act by getting most of the Democrats and all the southern Whigs to vote for the thing. It's that bill which put the final bullet through the Whig Party and, as Barone points out, led to the creation of the Republican Party. I teach a class on this period so that's why I'm so picky.